Decision Making and Consumer Essay

What major psychological processes influence consumer responses to the marketing program? * How do consumers make purchasing decisions? * In what ways do consumers stray from a deliberate rational decision process? Contents Introduction4 What influences Consumer behavior? 5 Cultural factors5 Social factors6 Personal factors7 Key psychological processes9 Motivation9 Perception10 Learning11 Emotion12 Memory12 The buying decision process14 Behavioral decision theory & behavioral economics20 Introduction The aim of marketing is to meet and satisfy target customers’ need and want better than competitors. Marketers must have a thorough understanding of how consumers think, feel, and act and offer clear value to each and every target consumer. Successful marketing requires that companies fully connect with their customers. Adopting a holistic marketing orientation means understanding customers-gaining a 360-degree view of both their daily lives and the changes that occur during their lifetimes so the right products are always marketed to the right customers in the right way. So we are going to explore individual consumer buying dynamism. Model of Consumer beha-vior Model of Consumer beha-vior Fig 1. 1 Fig 1. 1 The starting point for understanding consumer behavior is the stimulus-response model shown in figure 1. 1. Marketing and environmental stimuli enter the consumer’s consciousness, and a set of psychological processes combine with certain consumer characteristics to result in decision processes and purchase decisions. The marketer’s task is to understand what happens in the consumer’s consciousness between the arrival of the outside marketing stimuli and the ultimate purchase decisions. What influences Consumer behavior? Consumer behavior is the study of how individuals, groups and organizations select, buy, use and dispose of goods, services, idea or experiences to satisfy their needs and wants. A Consumer’s buying behavior is influenced by cultural, social, and personal factors. Cultural factors Culture is the fundamental determinant of a person’s wants ;amp; behavior. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members. Subcultures include nationalities, religions, racial groups and geographic regions. Virtually all human societies exhibit social stratification, most often in the form of social classes, relatively homogeneous and enduring divisions in a society, hierarchically ordered and with members who share similar values, interest and behavior. Social Classes Upper uppers Upper uppers Lower uppers Lower uppers Upper middles Upper middles Middle Middle Working Working Upper lowers Upper lowers Lower lowers Lower lowers Social factors Such as Reference groups, Family and Social roles and statuses affect our buying behavior. Reference groups A person’s references groups are all the groups that have a direct or indirect influence on their behavior * Membership groups * Primary groups * Secondary groups * Aspirational groups * Dissociative groups Groups having a direct influence are called membership groups, some of these are Primary groups with whom the person interacts continuously and informally such as family, friends, neighbors and coworkers. People also belong to Secondary groups such as religious, professional and trade-union, which tend to be more formal and require less continuous interaction. People re also influenced by groups to which they don’t belong. Aspirational groups are those a person hops to join; Dissociative groups are those values or behavior an individual rejects. Marketers must determine how to reach and influence the group’s opinion leaders opinion leaders are often highly confident, socially active. Family There are two families in the buyer’s life: * Family of orienta tion consists of parents and siblings * Family of procreation the person’s spouse and children Rules and status Role consists of the activities a person is expected, each role in turn connotes a status Personal factors Personal characteristic that influence a buyer’s decision include * Age and stage Our taste of food, clothes and recreation is related to our age. Marketers should consider critical life events or transitions like marriage. * Occupation and Economic Circumstances Marketers try to identify the Occupational groups that have above-average interest in their product and services and even tailor product for certain Occupational groups. Both product and brand choices are affected by economic circumstance: 1. Spendable income (level, stability and time pattern) 2. Savings and assets (percentage that is liquid) 3. Debts 4. Borrowing power 5. Attitudes toward spending and saving * Personality and self-concept Personality set of distinguishing human psychological traits that lead to relatively consistent and enduring response to environmental stimuli (buying behavior). Like self-confidence, dominance, autonomy, deference, sociability, defensiveness and adaptability. Brand personality is a specific mix of human traits that we can attribute to a particular brand. 1. Sincerity 2. Excitement 3. Competence 4. Sophistication 5. Ruggedness * Life style and values Life style is a person’s pattern of living in the world as expressed in activities, interests and opinions. The ‘’ whole person ‘’ interacting with his/her environment. Life styles are shaped partly by whether consumers are money constrained (lower-cost product) or time constrained (multi-tasking). Consumer decisions are also influenced by core value the belief systems that underlie attitudes and behavior. Core values go much deeper than attitudes and behavior, people’s choices and desires over the long term. Key psychological processes Four key psychological process: Motivation, Perception, Learning, and Memory Motivation We all have many needs at any given time. Needs are: 1. Biogenic arise from physiological states of tension such as hunger. 2. Psychogenic arise from psychological states of tension such as the need of recognition. Three of the best-known theories of human motivation: Sigmund Freud, Abraham Maslow, and Frederick Herzberg. * Freud’s Theory Behavior is guided by subconscious motivations * Maslow’s Theory Behavior is driven by lowest, unmet need Fig 2. 1 Fig 2. 1 Maslow’s Hierarchy of Needs Maslow’s Hierarchy of Needs * Herzberg’s Theory Behavior is guided by motivating and hygiene factors. It has two implications: 1. Sellers should do their best to avoid dissatisfiers. 2. The seller should identify the major satisfiers or motivators of purchase in the market and then supply them. Perception Perception is the process by which we select, organize and interpret information inputs to create a meaningful picture of the world. Perceptions are more important than reality because perceptions affect consumer’s actual behavior. People emerge with different perceptions of the same object because of three perceptual processes: * Selective attention Selective attention means that marketers must work hard to attract consumer’s notice * People are more likely to notice stimuli that relate to a current need * People are more likely to notice stimuli they anticipate * People are more likely to notice stimuli whose deviations are large in relationship to the normal size of the stimuli * Selective distortion Is the tendency to interpret information in a way that fits our preconceptions. Selective distortion can work to the advantages of marketers with strong brands when consumers distort neutral or ambiguous brand information to make it more positive. Selective retention We are likely to remember good points about a product we like and forget good points about competing products. It explains why marketers need to use repetition. * Subliminal perception Learning ((When we act we learn)) Learning induces changes in our behavior arising from experience. Learning theorists believe learning is produced through the interplay of drive s, stimuli, cues, responses ;amp; reinforcement. Drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where ;amp; how a person response. Discrimination means we have learned to recognize differences in sets of similar stimuli ;amp; can adjust our responses accordingly. Learning theory teaches marketers that they can build demand for a product by associating it with strong drives, using motivating cues ;amp; providing positive reinforcement. Hedonic bias occurs when people have a general tendency to attribute success to themselves ;amp; failure to external causes. Emotion Consumer response is not all cognitive ;amp; rational; much maybe emotional ;amp; invoke different kinds of feelings. A brand or product may make a consumer feel proud, excited, or confident. An ad may create feeling of amusement, disgust, or wonder. Memory * Short term memory (STM) a temporary ;amp; limited repository of information. * Long term memory (LTM) a more permanent, essentially unlimited repository. All the information ;amp; experiences we encounter as we go through life can end up in our long-term memory. Associative network memory model views LTM as a set of nodes ;amp; links. Nodes are stored information connected by links that vary in strength. A spreading process from node to node determine how much we retrieve ;amp; what information we can actually recall in any given situation. In this model, we can think of consumer brand knowledge as a node in memory with a variety of linked associations. The strength of these associations will be important determinant of the info we can recall about the brand. Brand association consist of all brand-related thoughts , feelings , perceptions , images, experiences , beliefs , attitudes ;amp; so on that become linked to the brand node. State farm mental map State farm mental map Fig 2. 2 Fig 2. 2 Memory process Memory is a very constructive process, because we don’t remember info ;amp; events completely ;amp; accurately. Memory encoding describes how ;amp; where info gets in the memory. The strength of the resulting association depends on how much we process the info at encoding ;amp; in what way. Memory retrieval is the way information gets out of memory. 1. The presence of other product info in memory can produce interference effects ;amp; cause us to either overlook or confuse new data. 2. The time between exposure to info ;amp; encoding has been shown generally to produce only gradual decay. 3. Info may be available in memory but not be accessible for recall without the proper retrieval cues or reminders. The buying decision process The five stage model of buying process: 1. Problem recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post purchase behavior 1. Problem recognition The buying process starts when the buyer recognizes a problem or need triggered by internal or external stimuli. Marketers need to identify the circumstances that trigger a particular need by gathering information from a number of consumers. 2. Information search Information sources * Personal: family, friends†¦etc. * Commercial: ads, web sites †¦etc. * Public: mass media †¦. etc. Experiential: handling, examining†¦etc. Search dynamic by gathering information, the consumer learns about competing brands ;amp; their features. Successive Sets in Decision Making: 3. Evaluation of alternatives * Some basic concepts will help us understand consumer evaluation process: First, the consumer is trying to satisfy a need. Second, the consumer is looking for a certain benefits from the product solution. Third, the consumer sees each product as a bundle of attributes with varying abilities to deliver the benefits. Belief is a descriptive thought that a person holds about something. Attitudes a person’s enduring favorable or unfavorable evaluations, emotional feelings, ;amp; action tendencies toward some object or ideas. Attitudes put us into a frame of mind: liking or disliking an object, moving toward or away from it. Expectancy-value model The consumer arrives at attitudes toward various brands through an attribute evaluation procedure, developing a set of beliefs about where each brand stands on each attribute. The expectancy-value model of attitude formation posits that consumers evaluate products ;amp; services by combining their brand beliefs according to importance. . Purchase decision In executing a purchase intention the consumer may make up to 5 sub decisions: Brand, Dealer, Quantity, Timing, and payment method. It is a Step between Alternative Evaluation and Purchase. Non-Compensatory Models of Choice: Conjunctive heuristic: the consumer set a min acceptable cutoff level for each attribute ;amp; chooses the first alternative that meets the min standard for all attribute. Lexicographic heuristic: the consumer chooses the best brand on the basis of its perceived most important attribute. Elimination-by-aspects heuristic: the consumer compare brands on an attribute selected probabistically ;amp; eliminates brands that don’t meet min acceptable cutoffs. Intervening factors Steps purchase intention between and Purchas: Steps between Alternative Evaluation and Purchase Steps between Alternative Evaluation and Purchase Fig 3. 1 Fig 3. 1 Attitudes of others Depends on 2 things: 1. The intensity of the other person’s negative attitude toward our preferred alternative. 2. Our motivation to comply with the other person’s wishes. Unanticipated situational factors may erupt to change the purchase intention (Perceived Risk): 1. Functional risk: the product doesn’t perform to expectations. 2. Physical risk: the product poses a threat to physical well-being or health of the user or others 3. Financial risk: the product isn’t worth the price paid. 4. Social risk: the product results in embarrassment in front of others. 5. Psychological risk: the product affects the mental well-being of the other user. 6. Time risk: the failure of the product results in an opportunity cost of finding another satisfactory product. 5. Post purchase behavior Marketer must monitor post purchase satisfaction, actions, uses ;amp; disposal. Post purchase satisfaction Satisfaction is a function of closeness between expectations ;amp; the product’s perceived performance. If performance falls of expectations the consumer is disappointed; if it meets expectations the consumer is satisfied; if it exceeds expectations, the consumer is delighted. Post purchase actions Satisfied consumer is more likely to purchase the product again ;amp; will also tend to say good things about the brand to others. Dissatisfied consumer may abandon or return the product. Private actions include deciding to stop buying the product (exit option) or warning friends (voice option). Post purchase uses ;amp; disposal Marketers should also monitor how buyers use ;amp; dispose of the product. Fig 3. 2 Fig 3. 2 How buyers use ;amp; dispose of the product How buyers use ;amp; dispose of the product Moderating effects on consumer decision making The manner or path by which a consumer moves through the decision-making stages depends on several factors including the level of involvement ;amp; extent of variety seeking. * Low-Involvement Decision Making Petty ;amp; cacippo’s elaboration an influential model of attitude formation ;amp; change, describe how consumers make evaluation in both low ;amp; high involvement circumstances. Central route in which attitude or change stimulates much thought ;amp; is based on consumer’s diligent, rational consideration of the most important product information. Peripheral route in which attitude formation or change provokes much less thought ;amp; results from the consumer’s association of a brand with either positive or negative peripheral cues. Marketers use 4 techniques to try to covert low involvement product into one of higher involvement: 1. They can link the product to an engaging issue. 2. They can link the product to a personal situation. 3. They might design advertising to trigger strong emotions related to personal values. 4. They might add an important feature. * Variety-seeking buying behavior Here consumers often do a lot of brand switching. Brand switching occurs for the sake of variety rather than dissatisfaction. The market leader will try to encourage habitual buying behavior by dominating the self-space with a variety of related but different product versions, avoiding out-of-stock conditions, & sponsoring frequent reminder advertising. Behavioral decision theory & behavioral economics Behavioral decision theory (BDT) has identified many situations in which consumers make seemingly irrational choices. 1. Decision heuristics. 2. Framing. 3. Mental accounting. * Decision heuristics 1. Availability heuristic consumers base their predictions on the quickness & ease with which a particular example of an outcomes comes to mind. 2. Representative heuristic consumers base their predictions on how representative or similar the outcomes are to other examples.